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PreparingFinancialStatements(50markstotal)

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Part1:PreparingFinancialStatements(50markstotal);1. Explainthedifferencebetweensavingandinvesting.(5marks);2. Listandexplaininvestorsmotivationforinvestinginstocks,bonds,preferredshares,and;convertibles,basedonthecharacteristicsofeachofthesefinancialvehiclesfromtheriskand;incomeperspectiveofinvestors.(10marks);3. Sylviacomestoyouforadviceinorganizingherfinancialaffairs.Sheis29yearsoldandmakes;$50,000peryear,30%ofwhichgoestopayrolldeductionsandtaxes.Sylviaalsoreceives;interestof$400peryearfrommiscellaneousinvestmentsandsavingsaccounts.;Sylviahastrackedherexpensesforthelastsixmonthsandprovidesyouwiththefollowing;estimatesfortheyear;Mortgagepayments,includingpropertytaxesand;interest;Groceries;Holidays;Carpayments,includinginterest;Utilities;Houseandcarinsurance;Gasforauto;Automaintenance;Lifeanddisabilityinsurancepremiums;Housemaintenance;Householdexpenses;Medicalanddentalexpenses;Entertainmentandlunches;Gifts;Clothing;Miscellaneousexpenses;$5,886;($3,094isinterest);$3,600;$3,500;$4778;($958isinterest);$3,000;$1,600;$2,200;$600;$400;$1,500;$600;$400;$5,500;$1,400;$3,400;$3,200;Sylviahasthefollowingassets;Housevalue;Cashinthebank;CSBs;Furnishingsandpersonalassets;Auto;RRSP;$100,000;$1,800;$8,000;$18,000;$20,000;$28,500;FNCE249v4;Assignment 2;August 25, 2014;Sylviahasthefollowingdebt;Creditcardbalancesowing;Lineofcreditowing;Mortgage;Carloan;$2,800;$5,000;$62,000;$18,500;Required;a. Basedontheinformationprovided,prepareanetworthstatementandanannualcashflow;statementforSylvia.(10marks);b. Sylviaalsohasplansforsavingandinvesting,andwantstofindawaytopayherselffirst.;Sheiswillingtomakeadjustmentstoherspendinghabitsandwouldliketoseetheeffectof;puttingaway10%ofhernetpayforinvesting.Drawupaproposedfuturecashflowbudget;thatwillincorporateherideas.;(5marks);4. Explainthreeadvantagesandthreedisadvantagesofinvestinginmutualfundsratherthan;directlyinvestinginassetssuchasstocksandbonds.(6marks);5. DiscusswhyinvestorsmaybeattractedtoinvestinginETFsratherthanmutualfunds.;(4marks);6. Describewhyinvestorswillcommonlyallocateareasonablepercentageoftheirinvestment;portfoliotobonds.(5marks);7. Describethedifferencebetweenaninvestorthathasahighrisktoleranceandaninvestorwitha;lowrisktolerance.(5marks);FNCE249v4;Assignment 2;August 25, 2014;Part2:InvestmentActivities(50markstotal);TobettermanagethestocksofthetwocompaniesyouselectedinAssignment2/3Preparation,Part2;(whichshouldhavebeensubmittedalreadyandisworth5%ofyouroverallcoursegrade),itisagood;ideatoprepareatopdownfundamentalanalysis.Thetopdownapproachreferstoanalyzingthe;economyandtheindustriesinwhichthetwocompaniesareinvolved,aswellasthecompanies;themselves.;1. Analyzecurrentandrecenteconomicconditions.Provideatwopage(maximum)economic;summary.Identifywhethertheeconomyisexpanding(booming)orcontracting(inrecession).;Justifyyourconclusionbycitingeconomicstatisticsandtrendsoverthepastthreeyears.You;canobtaineconomicdatafromtheStatisticsCanadawebsite.Analyzeandinterpretdatatrends;(e.g.,unemployment,inflation,realGDP,interest,housingstarts)overthemostrecentthreeyear;periodtoevaluatetheeconomyandCanadascurrenteconomicstatus.(10marks);2. Brieflydescribepoliticalandsocialtrendsthatmightaffectthesuccessofyourcompaniesinthe;longterm.Howwillthesetrendsaffectyourcompaniesstockvalues?(5marks);3. Describethebusinesssectororindustryinwhicheachofthetwocompaniesoperates.Focuson;informationthathelpsyouunderstandwhethertheindustryishealthyorstruggling.Trytofind;newsstoriesabouttheseindustriesinthemediaandothersources,includingsearchingthe;Internet.YoucanaccessTheGlobeandMailandFinancialPost.Youcanalsoaccesscompany;newsstoriesattheGlobeInvestorwebsitebytypingthetradingsymbolofacompanyintothe;SearchboxandclickingNews.Thesenewsstoriesmaybespecificallyaboutyourcompanyor;abouttheindustryandthecompanyscompetitors.(5marks);4. Foreachofthecompaniesyouhaveselected,findfinancialstatementsatthecompanyswebsite;oratSEDARforthethreemostrecentfiscalyearends.Then,foreachcompany,performthe;followingsteps(20marks);a. Tabletherevenue/salesdollaramountsandnetincomeaftertaxdollaramountsforat;leastathreeyearperiod.;b. Calculatealloftheratios(liquidityratios,financialleverageratios,etc.)showninthe;learningobjectivesinLesson3foreachofthecompaniesforeachfiscalyearendover;thepastthreeyears.Ifaratioisirrelevantforexample,ifthereisnoinventoryinyour;chosencompany(suchasabankorotherservicecompany)thenindicatenot;applicable.;c.;Besuretoshowyourcompletecalculations.;d. Identifythebusiness/productcycleofyourcompanies.Doesthecompanyintroducenew;productsfromtimetotime?Arecurrentproductsstillincreasingsales,aretheylevelling;off,oraretheydeclining?Howdoesthiscomparewithcompetitorsproductcycles?Are;eachcompanysbusinesscyclescyclical,countercyclical,ornoncyclical?;e. Identifyandexplaintherisksthatapplytoeachofthetwocompaniesstocks.;FNCE249v4;Assignment 2;August 25, 2014;f.;Assessmanagementsabilitiesandstrategiestotheextentthatinformationisavailable.;(Youcanfindmanagementandstrategyinformationbyreadingmanagementreportsin;eachcompanysfinancialstatementsoratsitessuchasthoseindicatedinStep3above.);2. Incorporatingtheinformationgatheredinthetopdownfundamentalanalysisin;Steps1to4above,provideaonepagesummaryforeachofyourcompaniesindicating;a. yourprojectionofcompanyperformanceandresultingstockpricesovertheshortterm;(oneyear)andlongerterm(fiveyears).Explainyourthoughtsandrationaleforyour;projections.(5marks);b. yourpersonalrisktolerance(basedontheassessmentyouhavejustdonefor;Assignment2/3Preparation,Part1)andhowgoodafittheseequityinvestmentsarefor;you,givenyouranalysisabove.(5marks)

 

Paper#30435 | Written in 18-Jul-2015

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